Russia drafts 2027 budget raising defense spending to 17.1 trillion rubles while cutting social programs

Defense allocations and three-year outlook

Russian government draft documents allocate 17.1 trillion rubles (between 178 billion and 180 billion euros) to defense for the 2027 fiscal year. This sum represents a 27% increase over earlier budget projections, making it the highest annual military allocation since Russia launched its invasion of Ukraine in 2022. Over the upcoming three-year planning period, cumulative military expenditures across the Russian budget will total 50 trillion rubles. While official plans for 2026 set defense spending at 12.1 trillion rubles, the government keeps actual expenditure figures classified. Russian economist Vladislav Inozemtsev stated that actual military outlays had already reached 10.7 trillion rubles by July 2026 and could climb to 16 trillion rubles (around 170 billion euros) by December. Inozemtsev described the planned 17.1 trillion rubles for 2027 as a moderate increase relative to actual 2026 spending.

Reductions in social, health, and education budgets

To accommodate the expanding defense budget, the draft financial plan introduces substantial spending cuts across domestic sectors. Social policy allocations, which encompass state pension payments, war veteran benefits, and maternity support, will decrease by 7% in 2027 compared to previous planning baselines. Funding for public healthcare faces a 6.8% reduction, while state education budgets will decline by 6%. Moscow correspondent Rainer Munz reported that reductions also affect infrastructure projects, placing the financial burden of the war directly on the domestic population. Russian authorities maintained that securing military victory in Ukraine takes precedence over domestic spending priorities.

Fiscal deficit and taxation measures

Escalating military expenditures continue to widen Russia's fiscal shortfall, leading the government to double its 2026 federal deficit forecast to 3.2% of gross domestic product. High central bank interest rates are projected to increase state debt servicing costs by 21.6% in 2027. To manage the deficit, the Kremlin is introducing targeted tax measures, including a dedicated levy on mining and metallurgy corporations. Domestic tax collections expanded during earlier quarters, with value-added tax revenues rising approximately 25% from January to July 2026 as a result of rate increases and tighter inspection rules. Russian tax authorities also closed roughly 5,000 intermediary firms in April 2026 as part of an enforcement campaign against shadow economy evasion.

Vladislav Inozemtsev evaluated the Kremlin's domestic revenue capacity and budgetary leeway.

At the current level, the financing options are practically unlimited.

Troop funding and parliamentary approval

Personnel compensation represents a substantial portion of ongoing wartime spending. Russia currently maintains approximately 700,000 troops deployed in Ukraine, with soldier salaries, enlistment bonuses, and family compensation costing the state nearly 5 trillion rubles in 2026. Inozemtsev stated that mobilizing an additional 300,000 to 400,000 personnel would require roughly 3 trillion rubles (around 31 billion euros) each year, a sum for which no funding is allocated in the 2027 draft. He considered a new mobilization wave unlikely in the autumn, noting that the Kremlin is assessing European support for Ukraine, French election outcomes, and Donald Trump's policy positions. The draft budget must reach the State Duma by 1 October 2026, where the ruling United Russia party holds a majority and is expected to approve the legislation.